COVID-19 vaccines have dramatically brightened the economic outlook. GDP probably still fell during the second lockdown in November, perhaps by up to 8% m/m, and the strict COVID-19 regional tier system will limit the rebound in activity in the coming months. But the removal of COVID-19 restrictions as vaccines are rolled out more widely next year should allow GDP to recover more rapidly beyond the next few months. As a result, rather than rise to 9%, we now think the unemployment rate will peak at 7%. And if the economy returns to its pre-pandemic level early in 2022, then it might not be that long before the unemployment rate falls back to 4%.
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